- Average market data renewal increases across major index, ratings and terminals providers hit 15% in 2024, pushing overall consumer spend levels to increase by over 8%
- But annual market data budgets have only seen a modest 2% growth in 2024
- And some firms are paying 12 times more than peers for the same products from the same vendor
Substantive Research, the research and market data discovery and pricing analytics provider, has collaborated with Expand Research, a BCG Company that benchmarks firms' business, operations and technology performance, to publish a joint white paper entitled “Market Data Pricing - 2024 in Review”.
Released today, the white paper combines Expand’s insights into consumers’ spend levels with Substantive Research’s insights into vendor pricing inconsistency and discounting behaviour.
This allows the comprehensive capture and analysis of the key market dynamics and the assessment of how they manifest themselves at the provider and product levels.
Background
Major providers enjoy significant pricing power, and leverage their brands as marks of reliability and quality. Without public pricing information, in a world where supply contracts are negotiated in confidential isolation, firms grapple with rising costs in the dark, not knowing if their costs are proportionate, or in line with what peers are charged.
The FCA recently investigated pricing in this market but in February 2024, the regulator ruled out “significant intervention because of potential unintended consequences.”
As a result, financial institutions are facing enormous challenges from a market driven by provider power.
White paper findings
The key finding of the research is that pricing inflation in the industry is unsustainable, with vendor cost increases far outpacing consumer budget and spend growth.
In addition, large pricing disparities continue in the traditionally opaque market data market, across Indexes, Ratings, Terminals and ESG data - with some firms paying many multiples more than peers for the same products from the same vendors.
The Substantive Research data showed that:
- The average renewal increases for major vendors have fluctuated over the past few years, with rates of 14% in 2022, 18% in 2023, and 15% in 2024.
- In contrast, annual market data budgets have only seen modest growth, increasing by 3% in 2022, 2.11% in 2023, and 2.01% in 2024, with 3.1% projected for 2025.
- Indexes: The largest pricing disparity discovered was 1,204%, meaning some firms are paying more than 12 times more than peers for the same products from the same providers - while y-o-y increases in price average at 25%.
- Ratings: The largest pricing disparity uncovered by the study was 388%, meaning some firms are paying almost 4 times more than peers for the same products from the same vendors - while y-o-y increases in price average at 11%
- Terminals: The study found that for identical products from the same vendors, some firms were paying over four times as much as their peers, with the largest price difference reaching 590%.
The Expand Research data showed that:
- Overall Market Data Spend increased by 8.1% in the last year, the highest rate of increase in recent years.
- Index and Ratings spend has increased substantially since 2019, both increasing by 9% in 2024.
- Terminal spend was the key driver of the y-o-y increase, and increased by 7% in the last year.
- ESG Data: Huge y-o-y increases of recent years are showing signs of slowing down, with a spend increase of 18% on average in 2024 versus 50%+ increases in previous years. 2024 also saw a reduction in the average number of vendors used for the first time.
Mike Carrodus, CEO at Substantive Research, said: “It’s remarkable how a small group of Index, Ratings, Terminal and ESG providers have become so integral to market infrastructure, and many would say that they are entitled to ensure they price robustly given their have-to-have status. But the opacity and inconsistency in pricing models means that market data consumers are flying blind with a top 3 cost line item, doing their best to mitigate year-on-year price increases, without any understanding of how their payments compare to the wider market.”
He added: “The numbers are not adding up - Substantive Research’s vendor pricing analysis and Expand’s spend analysis shows that something will have to give. As it is, financial institutions are either having to deal with budget overspend, juggling costly inputs into other budget lines, or shrinking their provider list, just when they want to be making the most of the growth in value-add datasets to improve performance and processes.”
Jens Munthe, Principal at BCG Expand, said: “Market data spend continues to increase at levels well above inflation, with Terminals, Indexes and Ratings spend continuing to rise at near double digit percentages. Amongst the many drivers, Terminal spend has seen the highest increase, which rose 7% in 2024, more than double that of 2023. Our study, including Substantive Research’s data, gives us the clearest picture yet of a troubling trend in the industry - where market data costs continue to accelerate well beyond market data budget growth.”
He added: “Financial institutions are facing cost pressures and margin compression throughout their organisations, so it is unsurprising that their C-suites are now focusing on the challenges of rising spend in market data. However this attention is exactly what the market data teams have been asking for - with buy-in from senior management, they can accelerate cost reduction and avoidance initiatives.”
Damian McCarthy, CEO at BCG Expand, said: “Expand’s proprietary, industry-standard benchmarking data provides the most comprehensive view of market data spend available, trusted by leading financial institutions worldwide. By combining this with Substantive Research’s unique insights into vendor pricing behaviors, together we are delivering an unparalleled, data-driven perspective on market data costs. This collaboration enables firms to make more informed decisions, ensuring they optimize their spending with full transparency and confidence in an area that has historically been opaque.”
Survey Universe
Buy side:
- 40 firms representing $20tr AUM;
- 55% UK & EU/45% North America;
- 70% long only/30% Hedge Fund
Sell side:
- 24 firms representing $25tr AUM;
- 50% UK & EU/50% North America
